How are Firms Sold?

Boone, Audra L.; Mulherin, J. Harold

doi:10.2139/ssrn.642306

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How are Firms Sold?

AFA 2005 Philadelphia Meetings

51 Pages Posted: 2 Jan 2005

See all articles by Audra L. Boone

Audra L. Boone

Texas Christian University - M.J. Neeley School of Business; European Corporate Governance Institute (ECGI)

J. Harold Mulherin

University of Georgia - Department of Banking and Finance

Date Written: March 2006

Abstract

As measured by the number of bidders that publicly attempt to acquire a target, the takeover arena in the 1990s was not competitive. However, we develop a new measure competition based on the pre-public, private takeover process that indicates that public takeover activity is only the tip of the iceberg of actual takeover competition during the 1990s. We show a highly competitive market where half of the targets were auctioned among multiple bidders, while the remainder negotiated with a single bidder. In event study analysis, we find that the wealth effects for target shareholders are comparable in auctions and negotiations.

Keywords: Mergers and acquisitions, auction, negotiation

JEL Classification: G34, D44

Suggested Citation: Suggested Citation

Boone, Audra and Mulherin, J. Harold, How are Firms Sold? (March 2006). AFA 2005 Philadelphia Meetings, Available at SSRN: https://ssrn.com/abstract=642306 or http://dx.doi.org/10.2139/ssrn.642306